Biden Doesn’t Know What He Thinks About Sanctions

The United States has committed to combatting corruption—but is hesitating to take on Russia.

By , the policy advisor for counter-kleptocracy at the Helsinki Commission, and , a postdoctoral research fellow at Harvard University.
U.S. President Joe Biden meets with the NATO secretary-general.
U.S. President Joe Biden meets with the NATO secretary-general.
U.S. President Joe Biden scratches his eye as he meets with NATO’s secretary-general during a NATO summit in Brussels on June 14. STEPHANIE LECOCQ/POOL/AFP via Getty Images

Earlier this month, as headlines focused on the administration’s final preparations to virtually convene world leaders for a global Summit for Democracy, the White House issued one of the most innovative policy papers in recent memory. The document—the United States Strategy on Countering Corruption—is the first of its kind, and a masterpiece that has arrived at a vital moment in the ideological tug-of-war between global democratic and autocratic states. After years of advocacy, counter-corruption is on its way to becoming a defining organizing principle of 21st century foreign policy. This focus is essential. As President Biden rightly warned over the summer, “corruption threatens United States national security, economic equity, global anti-poverty and development efforts, and democracy itself.”

But as is often the case in foreign policy, global events unfolding in real time complicated Washington’s strategic commitments and demonstrated tension between two foreign policy paths pursued in tandem by the administration. The same week that the administration revealed its historic counter-corruption strategy saw Russian President Vladimir Putin massing troops and equipment on the border of Ukraine, threatening an escalation of the invasion and destabilization he began in 2014. The moment called for a commensurate sanctions package rollout that specifically targeted Kremlin elite in Russia and the conduits for Kremlin strategic corruption—the use of corruption as a tool of foreign policy—abroad. No such package was forthcoming.

Instead, reports emerged that senior administration officials were actively lobbying lawmakers on Capitol Hill to abandon a longstanding bipartisan sanctions push to stop the Kremlin-backed Nord Stream 2 pipeline. The move is reminiscent of another decision made by the administration earlier this year. At the time, the administration waived congressionally-mandated sanctions on Nord Stream 2 AG—a fully-owned subsidiary of Kremlin-controlled Gazprom—and its chief executive, ex-Stasi officer Matthias Warnig, who was himself named a close confident of Putin in Alexei Navalny’s widely-viewed anti-corruption video earlier this year. That waiver conflicted with a courageous White House declaration establishing counter-corruption as a core national security interest just days later.

Earlier this month, as headlines focused on the administration’s final preparations to virtually convene world leaders for a global Summit for Democracy, the White House issued one of the most innovative policy papers in recent memory. The document—the United States Strategy on Countering Corruption—is the first of its kind, and a masterpiece that has arrived at a vital moment in the ideological tug-of-war between global democratic and autocratic states. After years of advocacy, counter-corruption is on its way to becoming a defining organizing principle of 21st century foreign policy. This focus is essential. As President Biden rightly warned over the summer, “corruption threatens United States national security, economic equity, global anti-poverty and development efforts, and democracy itself.”

But as is often the case in foreign policy, global events unfolding in real time complicated Washington’s strategic commitments and demonstrated tension between two foreign policy paths pursued in tandem by the administration. The same week that the administration revealed its historic counter-corruption strategy saw Russian President Vladimir Putin massing troops and equipment on the border of Ukraine, threatening an escalation of the invasion and destabilization he began in 2014. The moment called for a commensurate sanctions package rollout that specifically targeted Kremlin elite in Russia and the conduits for Kremlin strategic corruption—the use of corruption as a tool of foreign policy—abroad. No such package was forthcoming.

Instead, reports emerged that senior administration officials were actively lobbying lawmakers on Capitol Hill to abandon a longstanding bipartisan sanctions push to stop the Kremlin-backed Nord Stream 2 pipeline. The move is reminiscent of another decision made by the administration earlier this year. At the time, the administration waived congressionally-mandated sanctions on Nord Stream 2 AG—a fully-owned subsidiary of Kremlin-controlled Gazprom—and its chief executive, ex-Stasi officer Matthias Warnig, who was himself named a close confident of Putin in Alexei Navalny’s widely-viewed anti-corruption video earlier this year. That waiver conflicted with a courageous White House declaration establishing counter-corruption as a core national security interest just days later.

Given Putin’s apparent strategy to challenge the transatlantic community by weaponizing as many domains as possible (natural gas, space, and migration by its client state, Belarus, to name a few), it is a problem that no further sanctions were imposed on the Kremlin. The aggressive foreign policy pursued by Moscow—which has seized headlines for weeks—can only take place thanks to Putin’s autocratic system aided by domestic kleptocratic networks in Russia, and by undermining Western resolve to respond. This is pursued in part through the Kremlin’s practice of elite capture in Western capitals.

This policy bifurcation is all the clearer given how brilliant the administration’s counter-corruption strategy is. The scope of the document and the elevation of the issue to the national strategic level shows ambition that is beyond impressive. The strategy clearly highlights global corruption as the Achilles’ heel of democracy and correctly identifies corruption as a transnational rather than countrywide threat.

The proposals to counter illicit finance are particularly aggressive, committing the United States to finally clean up its own house. After all, kleptocrats have long seen America as a favorite venue to park dirty money. This was most vividly revealed in the recent Pandora Papers investigation, which demonstrated how South Dakota trusts have become a key illicit finance hiding place, and U.S. law firms—including Baker McKenzie, the largest U.S. law firm—have become the consiglieres of oligarchs like Ihor Kolomoisky and Jho Low. Equally encouraging in the strategy is the emphasis on the use of the Global Magnitsky Act and 7031(c) public travel ban sanctions actions to hold foreign corrupt actors accountable.

Nor was the administration’s strategy rollout all talk. On the date of publication, the U.S. Department of the Treasury announced that it would work to advance updated rules to curb money laundering in real estate by requiring transparency standards already in place for the banking sector. The U.S real estate industry was conspicuously exempted from anti-money laundering requirements for the past two decades, since they were first mandated to have programs in the Patriot Act of 2001. Closing this exemption will go a long way to getting dirty money out of U.S. real estate, whether it be New York City penthouses or commercial real estate in downtown Cleveland.

Moreover, the administration released the proposed rules to abolish shell companies—enforcing legislation passed by the last Congress—and appears to have all but endorsed the Enablers Act aimed at providing further authority to create due diligence requirements for other enablers of kleptocracy, such as lawyers, accountants, and trust and company service providers. The U.S. Department of Justice also announced last week that it would begin a long overdue process to modernize the Foreign Agents Registration Act (FARA), one of the most consequential laws to ensure transparency of foreign state lobbying in Washington.

But the lack of well-known, high-level sanctions targets taken with the strategy release is troubling. Those designations that were issued were largely symbolic—with the notable exception of Angola’s Isabel dos Santos, a notorious kleptocrat known for partying with American celebrities. It provides a signal to authoritarian regimes that the West has not yet consolidated an effective strategy to counter strategic corruption and resulting elite capture. If left unchecked, it can contribute to an erosion of public trust across the transatlantic community, undermine policies to address contemporary authoritarian challenges, and fracture political cohesion.

An archetype of authoritarian elite capture can be found in none other than former German Chancellor Gerhard Schröder, who supported Russia’s Nord Stream pipeline while in office, before becoming chairman of the shareholders’ committee of Nord Stream AG, as well as chairman of Russia’s state-controlled oil enterprise Rosneft since leaving office. Schröder’s advocacy for pro-Putin policy positions over the years has led to former Ukrainian Foreign Minister Pavlo Klimkin calling the former German chancellor “the most important Putin lobbyist in the world.” It also led to the term “Schröderization,” describing the stream of former senior Western officials employed by Russian state-owned-enterprises after leaving office.

And the parade of “Schröderized” officials marches on. In June, former French Prime Minister François Fillon was nominated by Russian authorities to be “representative of the Russian Federation” on the board of Russian state-owned oil group Zarubezhneft, while former Austrian Foreign Minister Karin Kneissl joined the board of Rosneft. While he was foreign minister, Klimkin called for sanctions on Schröder for his role “pushing Putin’s projects abroad,” though there is neither a sign that such sanctions are forthcoming on either side of the Atlantic nor explicit norms to reverse the “Schröderization” of the West. Part of the problem is a reticence to admit this is an endemic problem in the first place, in part due to the diplomatic sensitivity of the issue.

The Unites States Strategy on Countering Corruption doesn’t explicitly define or suggest a remedy for this problem. It demonstrates just how difficult addressing the issue is given that it requires the admission that post-government work for authoritarian state-owned, state-adjacent, or state-influenced enterprises or associated oligarchs by former senior Western officials can undermine the public trust—even when the action itself is not currently barred by law. Of course, such examples aren’t absent in the American context. While former Republican senator and presidential candidate Bob Dole has been eulogized for his government service following his passing this month, the role he played in becoming a vector of kleptocratic foreign influence after leaving the Senate can’t be overlooked.

Which brings us back to the foreign policy tension brewing within the administration. Think of it this way: Foreign policy practitioners and experts (your authors included) have a proclivity for using tropes. It’s common to hear calls for a more aggressive Russia sanctions policy dismissed by those calling on us to “think bigger” or “more strategically.” Recently, “think bigger” has referred to consolidating political support in the West to counter Beijing, which will somehow be achieved through issue-level inaction on countering Russia. But overlooking sanctionable activities by Moscow today will only leave Chinese officials with a playbook of how to undermine global democracies tomorrow.

For its part, the Chinese Communist Party (CCP) is now watching closely to see if the United States is serious about its counter-corruption strategy and is clearly terrified by all this talk of democracy. Its ambassador to the United States and the Kremlin ambassador together penned an opinion piece extolling the virtues of their “democracies.” This was a clear victory for the pro-democracy camp, baiting these two autocracies into arguing that democratic norms are the only legitimate norms of governance. Counter-corruption can do the same thing. The more the United States pursues it, the more autocracies are forced to wrestle with it. Only for them, corruption underpins their very form of government.

At the end of the day, truly fighting corruption will mean fully purging oligarchic money from the U.S. financial system. It will require the political will to sanction powerful foreign elites, as well as take on the institutions that enable them. It will require a recognition that transnational networks are used by the CCP, the Kremlin, and many other dictators to pursue their foreign policy goals and exert influence, and that these networks are not confined to state borders. They could include CCP operatives, Russian oligarchs, German business leaders, British lawyers, and American lobbyists—all in a single network.

These are not networks that can be defeated by only targeting individual crooks in developing countries. Rather, the kleptocrats and enablers who make up strategic corruption networks span many different countries and sometimes even hold allied citizenship, but that should not matter when it comes to protecting democratic norms. If the counter-corruption strategy is to succeed, it must be allowed to target strategic corruption. A transatlantic FARA-style consensus that limits the ability of former senior officials from taking positions working for authoritarian enterprises or oligarchs abroad would go a long way to stem the tide.

The administration’s counter-corruption strategy is the long telegram of the 21st century. It should back up this new strategy with an unwavering commitment to fight corrupt transnational networks, and establish transatlantic norms bolster public trust. With the health of global democracies on the line, it’s hard to think of anything bigger.

Paul Massaro is the policy advisor for counter-kleptocracy at the Helsinki Commission. Views expressed here do not necessarily reflect those of the Helsinki Commission.

Benjamin L. Schmitt is a postdoctoral research fellow at Harvard University, a senior fellow for democratic resilience at the Center for European Policy Analysis, and a “Rethinking Diplomacy” fellow at the Duke University Center for International and Global Studies. Twitter: @BLSchmitt

Join the Conversation

Commenting on this and other recent articles is just one benefit of a Foreign Policy subscription.

Already a subscriber? .

Join the Conversation

Join the conversation on this and other recent Foreign Policy articles when you subscribe now.

Not your account?

Join the Conversation

Please follow our comment guidelines, stay on topic, and be civil, courteous, and respectful of others’ beliefs. Comments are closed automatically seven days after articles are published.

You are commenting as .

More from Foreign Policy

A closeup of Russian President Vladimir Putin
A closeup of Russian President Vladimir Putin

What Russia’s Elites Think of Putin Now

The president successfully preserved the status quo for two decades. Suddenly, he’s turned into a destroyer.

A member of the Zimbabwe Republic Police is seen in front of an electoral poster of President Emmerson Mnangagwa
A member of the Zimbabwe Republic Police is seen in front of an electoral poster of President Emmerson Mnangagwa

Cafe Meeting Turns Into Tense Car Chase for U.S. Senate Aides in Zimbabwe

Leading lawmaker calls on Biden to address Zimbabwe’s “dire” authoritarian turn after the incident.

Steam rises from cooling towers at the Niederaussem coal-fired power plant during the coronavirus pandemic near Bergheim, Germany, on Feb. 11, 2021.
Steam rises from cooling towers at the Niederaussem coal-fired power plant during the coronavirus pandemic near Bergheim, Germany, on Feb. 11, 2021.

Putin’s Energy War Is Crushing Europe

The big question is whether it ends up undermining support for Ukraine.

U.N. Secretary-General António Guterres attends a press conference.
U.N. Secretary-General António Guterres attends a press conference.

A Crisis of Faith Shakes the United Nations in Its Big Week

From its failure to stop Russia’s war in Ukraine to its inaction on Myanmar and climate change, the institution is under fire from all sides.